BY MEGAN DeSMEDT
A college degree is essential in today’s economy, but it is becoming harder to attain due to financial barriers. The combination of rising costs, stagnant grant aid and shrinking state budget allocations to higher education has made a college degree hard to afford.
According to the U.S. Department of Education, more than 400,000 qualified high school graduates a year delay or forgo enrolling in college due to financial barriers, amounting to 4.4 million students lost between 2001 and 2010.
For students who make it to college, financial pressures can lead students to drop out, or work more than 20 hours a week, which is proven to lower the odds of completing a degree. After graduation, the burden of student loan repayment often limits career options and the ability to save money or start a family. In 2008, two-thirds of all four-year college graduates borrowed, with an average debt of $23,186. The number of college graduates with at least $40,000 in student loan debt has increased tenfold in the past decade.
Meanwhile, young adults are facing record unemployment. Unemployment among 16- to 24-year-olds was 18.5 percent in July 2009, the highest rate on record. The unemployment rate for college graduates aged 20 to 24 in the third quarter of 2009 was 10.6 percent, an increase of three points from the third quarter of 2008.
New data reveal many borrowers are indeed having trouble paying their student loans. Currently, 56 percent of counties in the United States have double-digit student loan delinquency rates, some as high as 50 percent.
The Senate Health, Education, Labor and Pensions (HELP) committee is considering a companion bill to the Student Aid and Fiscal Responsibility Act, which passed the House on Sept. 17, with a bipartisan vote of 253-171. The bill would make historic investments to make higher education more affordable and accessible, and to promote academic success, all without spending new taxpayer dollars.
Specifically, the bill strengthens the nation’s largest aid program, the Pell Grant, by investing $40 billion over the next 10 years to annually increase the maximum grant award. This investment is long overdue and will not only decrease student reliance on loans to pay for college, but will make several hundred thousand more students eligible for the grants.
In addition, the House bill will reduce private student loan debt. It provides $6 billion in additional funding to the need-based Perkins loan program, which supplies low cost, low interest loans.
Increasing the number of students who can take out Perkins loans (and the amount available to them) will decrease demand for risky, expensive private loans.
Private student loans are little better than credit cards, as they have high variable interest rates, sometimes topping 18 percent, and carry none of the borrower protections federal loans have.
The bill recognizes that community colleges are essential access points for higher education and engines of economic growth. It invests $9 billion in community colleges to enhance student instruction and bolster work force retraining programs.
Best of all, this legislation pays for itself. It would end the subsidies that banks and private lenders receive to originate federal student loans, and make all these loans through the vastly more economical Direct Loan program.
The switch creates $87 billion in savings that fully funds all the new educational investments in the bill.
Lenders and banks are lobbying hard against this common-sense reform in Washington, but they are outnumbered by students on hundreds of campuses across the country and their parents, who are demanding common-sense reforms to lower the cost of higher education.
Both Pennsylvania senators, Arlen Specter and Bob Casey, have a record of supporting proposals to keep college within reach. As a member of the HELP committee, Casey’s support of this legislation is particularly important.
Please join my organization in urging them to support a Senate bill that delivers for students and families.
Megan DeSmedt is the state director of the Pennsylvania Public Interest Research Group (www.pennpirg.org), a state-based nonpartisan citizen advocacy organization that works in the public interest.
